Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—TexAppCt: Misrepresentation of Ability to Transfer Lease Violated Texas Consumer Protection Law , (Jan 22, 2013)

By Jody Coultas, J.D.

A restaurant seller violated the Texas Deceptive Trade Practices Act (DTPA) by falsely representing that the buyer would be able to operate the restaurant as the lessee of the building, according to a Texas appellate court (Vuong v. Luk, January 17, 2013, Keyes, E.)

After a restaurant sale went south, the buyer filed DTPA claims against the seller. Despite the buyer’s representations to the contrary, the owner of the restaurant building refused to transfer the lease to the seller. A trial court found that the seller knowingly violated the DTPA in the course of selling the restaurant by falsely representing and warranting that the property owner had agreed to assign the lease to the seller and failing to disclose the true terms of the lease to the seller.

In order to state a DTPA claim, a plaintiff must show that he was a consumer that detrimentally relied on false, misleading, or deceptive acts by a defendant and suffered an injury as a result of the acts.

The evidence was legally and factually sufficient to support the trial court’s finding that the restaurant seller violated the DTPA by employing false, misleading, or deceptive acts and by breaching an express warranty, according to the court. The buyer argued that he was misled by the seller to believe that the property owner had agreed to assignment of the lease to the buyer. The DTPA lists a number of deceptive acts, including representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve. The seller’s testimony that he believed he had the property owner’s permission to assign the lease was not supported by the evidence, and the trial court was allowed to disbelieve the seller.

There was also sufficient evidence to support the trial court’s finding that the buyer detrimentally relied on the seller’s misrepresentations and deceptive acts, according to the court. The seller argued that the buyer did not rely on the representations about the lease because the seller was aware of the property owner’s option to refuse assignment of the lease. The seller also argued that the buyer caused his own damages by abandoning the restaurant after learning that the property owner refused the lease assignment. The buyer left the restaurant believing that he had been cheated and had no right to occupy the building. There was sufficient evidence that the buyer detrimentally relied on the misrepresentations in purchasing the restaurant and had no knowledge that the property owner could refuse assignment.

The damage award was upheld by the court as supported by the evidence. Even if the court accepted the seller’s argument that the buyer was required to mitigate his damages, the seller failed to show the amount of damages the buyer could have avoided.

The case is No. 01-11-00178-CV.

Attorneys: David A. Chaumette (De la Rosa & Chaumette) for Tommy T. Nguyen. Michael Singh Panesar (Law Office of Michael S. Panesar) for Taiwai Luk.

Cases: StateUnfairTradePractices TexasNews